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bear market strategies

Shorting a Stock: A Viable Bear-Market Strategy?

Our approach to covered call writing and put-selling in bear markets include an arsenal of trading concepts that will enhance our opportunities for successful outcomes. These include: Use of deep in-the-money calls Use of deep out-of-the-money puts Use of lower implied volatility securities Use of low-beta stocks Use of exchange-traded funds Lowering our time value […]

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managing covered call trades

Managing Winning Trades for High Implied Volatility Stocks

Covered call writing and cash-secured put-selling are conservative strategies geared to retail investors who have capital preservative as a key strategy requirement. When we use high implied volatility underlying securities the strategy will have a broader range of risk-reward exposure. This article was inspired by Randy P. who had outstanding results using Applied Optoelectronics Inc. […]

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Ask Alan

Ask Alan #142 – “Evaluating the Cost-To-Close Prior to Contract Expiration”

Alan answers a question posed by Andrew, who asks: I purchased UCTT for $27.90 and wrote an October 1-month $30 call for $0.77. The stock is now trading at $31.62 and the “ask” for the call is $2.50. Should I unwind or is it too costly? Thanks, Andrew ——— It’s the 2nd Wednesday of the […]

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The Collar Strategy from a Delta Perspective

When covered call writing is combined with protective puts the strategy is known as the collar strategy. The short call places a ceiling on gains and the long put represents a floor protecting losses. The two option positions should result in a net credit. Typically, out-of-the-money calls and puts are selected. Covered call writing and […]

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technical analysis for covered call writing

Volume Versus “Deliverable Volume” Explained and Analyzed

Trading volume is the number of trades for a security in a given time frame. On a chart volume is typically represented as a histogram (vertical bars) and represents a confirmation or lack thereof of the other technical indicators. For example, if a moving average breaks below support on high volume, it is more significant […]

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dividends and covered call writing

Arbitrage: Part II

In part I of this arbitrage series we defined arbitrage as the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. Arbitrage exists because of […]

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Arbitrage: Part I

Understanding stock and option pricing requires an awareness of arbitrage and market efficiency. Although most retail investors do not have the tools to take advantage of arbitrage opportunities, a comprehensive understanding of how it works adds to our financial literacy and so I am sharing this 2-part series with our readers.   What is arbitrage? Arbitrage is the […]

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covered call writing and earnings reports

Should Ex-Dividend Dates Be Treated the Same as Earnings Report Dates?

Covered call writers and put-sellers must be aware of earnings report dates and ex-dividend dates but for different reasons. A golden rule in the BCI methodology is never to sell an option if there is and earnings report date prior to contract expiration. In July 2017, Terry sent me an email asking if ex-dividend dates […]

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covered call writing and news events

Price Gaps and the Need for Exit Strategy Execution

Position management is one of the 3 required skills needed for covered call writing and put-selling. When share price gaps up or down there is a strong possibility that an exit strategy opportunity will present itself. There are times, however, when no action is the best action. On June 26th, 2017, Luis contacted me about […]

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Russell Rebalancing Day: A Cause for Concern?

Covered call writers and put-sellers are aware of the value to avoiding risky events like earnings announcements. An impending FDA announcement regarding the efficacy of a new drug being tested is another example. This article will define and explore the potential concerns of trading on or though Russell Rebalancing Day.   What is Russell Rebalancing Day? […]

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